tv Nightly Business Report PBS June 16, 2011 7:00pm-7:30pm EDT
>> tom: good evening and thanks for joining us. a see-saw day on wall street as stocks slipped in and out of positive territory. susie, the uncertainty about greece's financial problems was a big factor. >> susie: and tom, even though there was some encouraging news today about the u.s. housing market and jobs, investors were still jittery. here's how things looked at the close: the dow rose 64 points, the nasdaq lost almost eight, and the s&p 500 added more than two points.
as for volume, just over a billion shares moving on the big board, and just under two billion on the nasdaq. >> tom: the volatility in the markets is raising the question: is this the beginning of a new bear market, or is this a correction? erika miller reports. >> reporter: remember the teflon stock market, where no concern seemed to stick? now it's been replaced by velcro. veteran strategist phil dow says any concern is seen as an excuse to sell. >> it's easier to scare people than it is to make them confident, and right now, it's a scary time. >> reporter: the dow and the s&p 500 have dropped 7% from their april 29 highs. the nasdaq and the russell 2000 have been hit even harder. strategist andrew burkly says the market is in the midst of a garden variety correction. >> we are just viewing this as a correction. we are almost in the third year of this bull market, which started march 2009. so, we are definitely advanced, in the later stages. historically, what that meant is
more time in trading ranges, more choppy environments. >> reporter: stocks are likely to take their cue from second- quarter earnings. but some analysts are concerned because expectations have been rising, even in the face of weakening economic data. >> that's the biggest risk we see out there from the u.s. equity market side right now-- just where those earnings expectations are. how temporary is this soft patch we are going through? the longer it lingers on, the more difficult it's going to be for companies to match fairly elevated expectations. >> reporter: in addition to earnings, there are other big concerns, like slowing economic growth, the end of the fed's quantitative easing program, the european debt crisis, and the looming august deadline to raise the u.s. debt ceiling. from a technical perspective, there's also reason to be nervous. the s&p 500 is in danger of falling below it's 200-day moving average, a line in the sand that often separates bull and bear markets. but in spite of all these concerns, some market pros think
the s&p 500 could rise 15% by year end. >> my guess is that we are in the midst of a reasonable economic recovery... reasonably stable economic recovery with slow growth rates, but where corporate america is doing better because we tend to have an export-driven economy. >> reporter: he recommends long- term investors take advantage of the recent sell-off to buy large u.s. multinationals paying high dividends. >> my guess is that kind of an asset could deliver 7% to 8% total returns for the next ten years. >> reporter: that may provide some reassurance to investors unnerved by the market's recent plunge. the dow and the s&p 500 have lost nearly all their gains for the year, and the nasdaq is already underwater. erika miller, "nightly business report," new york. >> susie: meanwhile, in greece today, more turmoil over how to deal with that country's severe financial crisis. street protests calmed down, but the greek government is still facing tough criticism over new austerity measures, and european officials are demanding that
greece make more budget cuts if it wants new loans. joining us now to talk about what happens next, and the impact on the u.s. financial markets, stuart schweitzer, global market strategist at j.p. morgan private bank. nice to have you here with us. >> hey, susie, always a pleasure. there was a lot of talk about a global financial crisis. >> let's remember, greece is only 2% of the european economy, and so a pretty infintesimal fraction of the global economy. but the problem here is that the greek government has a lot of debt outstanding, much of which is held by greek banks and by banks all across europe. so if there were to be a default or restructuring on that debt, it would erode the capital and question the capital strength and the balance sheets strength
of these different banks. that's the risk. that's the concern. >> susie: and u.s. banks are holding billions of dollars of greek debt. how exposed are they? how much at risk are they? >> oh, i don't think that the risk to u.s. banks is very large. i don't know the exact number in terms of the dollar exposure, but the thing to bear in mind is that the capital strength of u.s. banks is so much improved over the past couple of years. in fact, u.s. banks have raised more than twice as much capital as a percent of assets than european banks have over the two years since the financial crisis hit bottom. >> susie: now european officials suggested today, by the weekend, there will be a new bailout loan package for greece. how realistic is to expect with this new money that kbrooes will get its financial act together?
>> i think that's a real stretch. greece has fundamental problems. it has an economy that is going downhill. every time they are obliged to take another knick out of spending, take a further axe to spending, it hurts their economy further. and that hurts tax revenues, and that means that the deficit reduction they're trying to achieve doesn't really happen. so greece is in a very difficult spot. and that means greek debt holders ultimately may suffer some losses. >> susie: so bring this all back here to the u.s. and to american investors. what does all of this uncertainty and turmoil in greece and throughout europe mean for american investors and the u.s. financial markets? >> well, i think we've got to broaden the question out to what does the turmoil, not only in the european financial market, but in the u.s. economy mean for
u.s. and global investors because let's face it-- the economic data of the last couple of months has been decidedly disappointing. and i will just make one point about this. this is the second year in a row in which expectations for the economy were very, very robust for a time earlier in the year, people almost became complacent, and complacency is the economy of good market returns because once people are expecting good news, it doesn't take much to undermine their confidence. that's the process we're going through now. >> susie: exactly. and investor confidence is at a low. you heard our story at the top of the program, erika's package about is this a correction or is this the beginning of a new bear market? where do you stand on that question? >> i think it's a correction but it's a correction that may have somewhat further to run. the rule is, i think you've got
to get people pegs misc enough for developments to begin to exceed their expectations. and that probably means that people have to digest more difficult news. my hope is that the corporate earnings season, which was also referenced in your earlier report, will turn out relatively okay. one thing that i am impressed by is the determination of corporate america to maintain both balance sheet and cost control. it's one of the things that has protected us from a far worse economy and market in the last couple of years. >> susie: okay, that's a bright spot that we can hang on for a little bit. thank you so much. really appreciate you coming on tonight. >> always a pleasure. >> susie: and we've been speaking with stuart schweitzer, global market strategist at j.p. morgan private bank. >> tom: here are the stories in tonight's "n.b.r. newswheel." new jobless claims fell last week by twice as much as what economists expected, down 16,000. but total claims remain above 400,000, indicating the economy
still is struggling to add jobs. the u.s. senate today voted to end a $5 billion tax credit for ethanol producers. that credit gives oil refiners 45 cents a gallon if they mix gasoline with ethanol. california governor jerry brown today vetoed the budget proposed by the state legislature. that sends his own party back to the drawing board. governor brown says the plan to close the state's $10 billion budget gap is full of "legally questionable maneuvers, costly borrowing, and unrealistic savings." still ahead-- what tuscaloosa, alabama, and joplin, missouri, can learn from another tornado ravaged town. it's tonight's "planet forward." >> susie: a mixed view on the housing market today: builders broke ground on more new homes in may. housing starts were up 3.5% from april's levels. building permits were also up, rising over 8% to their highest level since december. but those gains were largely due to apartment construction, not
investors today as stocks struggled to find a clear direction. as we have for the past few nights, let's begin with today's trading of the s&p 500, illustrating the mixed market. through the morning, there was some tentative buying, but by mid-afternoon, that disappeared. the index hit its low of the day just before 3:00 eastern time before climbing back in the last hour. and let's pull out to the past 90 sessions, showing today's intra-day low was just above the march low, an important area to watch. defense was the order of the day for stocks. the utility and consumer staples sectors saw the best gains today. helping the appetite for utility stocks may have been a $4 billion buyout of natural gas
utility southern union. shares shot up 17.5%. energy transfer equity will pay the equivalent of $33 per share. the deal creates the biggest nat gas pipeline utility in the country. the market likes the deal. the buyer, energy transfer, saw its shares jump more than 8% to just below its 52-week high. consumer staples were helped by better than expected results from supermarket operator kroger. it beat estimates by six cents per share. the company has been working to keep prices down to attract new customers. kroger also raised its full year forecast. that brought buyers into the stock, up 4.5%. it takes kroger stock to its highest price this month. two other grocery stores saw buyers as well. safeway added 3.5%; whole foods was up 2.4%.
while we're in grocery stores, pork and turkey producer smithfield foods saw a nice rally. strong earnings and a forecast for higher pork prices helped out shares today. this is a six-week high today. late confirmation this afternoon that capital one is buying i.n.g. direct. it's a $9 billion cash and stock deal. it will make capital one the fifth biggest depository bank in the country. capital one shares added just over 2% today. i.n.g.'s american shares were flat. after the close, blackberry device maker research in motion reported earnings in line with estimates. but revenues were disappointing and it knocked down its guidance. research in motion's stock has been sinking since february. the selling picked up after sour guidance in april. after the close, shares fell 14% below this closing price, down to just above $30 per share. and that's tonight's "market focus."
>> susie: fema trailers started arriving in joplin, missouri, this week after a devastating tornado ripped through the town, leaving hundreds homeless. getting residents settled into temporary housing is a first step in the long process of rebuilding. and rebuilding can bring opportunity, as we see in tonight's segment of "planet forward," our partnership with the george washington university social media project. frank sesno explains how towns
like joplin can learn from one small midwest town that used innovation to build its comeback. >> reporter: a massive tornado hit greensburg, kansas, nearly blowing the town right off the map. instead of giving up, greensburg vowed to build back better. >> not for today, but for 40 or 50 years from now >> reporter: greensburg's leaders decided to rebuild smarter, finding strength in sustainability. inspired by their commitment, planet forward member and gwu student max chen submitted this idea after travelling to greensburg over spring break. the innovation? turn all the help that follows a tragedy into opportunity. take the local john deere dealership. it could have moved its operations to a nearby town. >> our family-owned dealership decided we were going to come back right away. >> reporter: owner mike estes said the outside help was essential. >> we had a lot of good support for greensburg.
this was not any one person rebuilding this town. >> reporter: the support had real value-- it started with federal disaster relief. then, insurance settlements, to help rebuild and to replace inventory-- the dealership alone received $23 million. state lawmakers pushed through new funds and tax breaks to help businesses rebuild in greensburg. the governor hired an architect to help design new buildings that were leed-certified. leed means they're built sustainably. the federal government pitched in to help build new wind turbines. back at the dealership, estes had extra support from john deere's corporate leadership. >> they really did catch this, because they are interested in sustainability. they did help us with some of our leed paperwork. >> reporter: where did all that money go? well, estes got a brand-new leed-platinum building. and the rest of the town saw dramatic improvements. >> we have light registers that measure how many lumens of light
are in the space. >> reporter: the school superintendent walked max through the towns newly rebuilt school. it has more natural light and geothermal heat, and something just outside. >> we have a wind generator. it's a 50-kilowatt endurance tower that supplies electricity for the building. >> reporter: these features help the school save an estimated $150,000 a year on energy costs. you'll find more sustainable buildings down the road-- a new hospital, where they're saving about $120,000 a year on energy; and a new courthouse-- it's green, too-- where they're saving $14,000 a year greensburg hopes to spread the word, reaching out to other towns recently devastated by tornadoes and other disasters, and showing them how to rebuild stronger, better, greener! >> susie: you can join the conversation on helping our planet become stronger greener, better. check out the "planet forward" link on our web site, nbronpbs.org. >> tom: here's what we're watching for tomorrow: the latest reading on consumer
sentiment from reuters and the university of michigan. we'll talk export strategy and china's currency with u.s. trade representative ron kirk. also tomorrow, have financial stocks bottomed? it's the worst sector so far this year. our market monitor will be bernie schaeffer, chairman of schaeffer's investment research. >> susie: chrysler is recalling thousands of cars and minivans due to a manufacturing problem that can cause the steering to fail. the recall affects 12 models in the 2011 model year and spans across product lines. it includes the chrysler 200 and town and country. several dodge vehicles are on the list, like the avenger, caliber and grand caravan. the recall also impacts several jeep models, including the compass, liberty, patriot and wrangler. >> tom: toyota continues recovering from japan's devastating earthquake. it now thinks production here in the u.s. will be back to pre-quake levels by september.
of school, and many americans will soon hit the road for family vacations. in tonight's "kids & cash," neale godfrey suggests its a golden opportunity for your children to learn about budgeting. she's c.e.o. of the children's financial network. >> it's once again time to take a family vacation. are you and your children tearing through the house, stuffing clothes in bags and wildly printing out maps? why not take a novel approach instead and plan ahead? vacations can be educational and fun if you turn them into a family project. when children take an active role in planning a vacation, they make an investment in their own adventure. to begin, have your children look online, with you, for ideas about where to go. they can also help shop around for good deals. once you've all agreed on a
destination, collectively gather information about the place you plan to visit and the activities your family might enjoy. the initial cost of the vacation is just the start of your budget planning. in addition, you'll need to budget for extra clothes, meals, and souvenirs. think about how much you'll need to spend, minus how much is already saved. then, before the trip, ask your children to contribute to the family vacation, perhaps by figuring out ways to save money along the way. for example, instead of eating every meal in a restaurant, the family could make sandwiches for lunch. ideally, your children should save their money and buy their own souvenirs and gifts while on vacation. if they want to earn extra money for the trip, they could do odd jobs around the house. a trip to a foreign country is a wonderful opportunity to explain how foreign exchange works. bring along a calculator to help with conversions. enjoy your trip and remember, good planning will guard against disappointment and overspending. i'm neale godfrey. >> it was a floppy disk. today we could use the cloud upon back in 1911, banking was done in person improbably in cash. then came a piece of plastic with a magnetic stripe. the company behind those innovations is ibm, and it's celebrating its 100th anniversary. we spoke with bernie myerson about what helped shape the last
100 years of technological change and what's next. >> there have been tremendous societal challenges and one of the unique aspects of the ibm company is we embraced those societal challenges and brought home the solutions. you just referred to it about the invention of punchcards and that whole methodology was driven by the need after the great depression to install social security. you can't do that on 30 million scraps of paper. >> you reference problems and solving problems and the best technology addresses a problem, makes addressing that problem more efficient and brings the cost down. with that in mind where are the new venezuela most profitable and impactful. >> the world is just now moving into the era of what we call big data. what i mean by big data is massive data sets, such as the data set involving the health information of the entire world community. imagine if you could, not just digitize it, but take the unstructured data in dinner
languages and different format,combine that show, sort through it, and actually codify it so you could do data mining and dig through it to find the absolute best outcomes for any medical condition. think about the learning you can get from that about health, about the economy, about ecology. it would be spectacular and it's a whole new field just emerging. >> one of the fields ibm helped create is data storage, magnetic tape and everything that followed that. but what you're getting to is accessing and looking at that data, not just storing it. that's something entirely different. >> exactly. what i'm talking about doing is understanding it. you're basically going from being impressed by finding the proverbial need nettle haystack to finding the grain of sand under mount everest and that grain of sand have a profound impact on society. if you find it and can understand it, being proactive and actually solving problems before they manifest themselves.
>> you're talking about anticipateory technology. how do you apply that in this economy and, again, where are the opportunities? >> i'll give you an example. for instance, assuming that you could tell where every vehicle was in a city at any given moment, you don't have to identify it. just know that a car is there and how fast it is going. if you can follow that you can build models that describe the traffic patterns at any given time. furthermore, from those models, and the data you can actually predict the future. if you tell me what's happening in this instant i can tell you 20 manslaughter from now where there will be a traffic jam where none exists at this moment. if you have that information, imagine being able to link back into the control system of traffic flow and manipulate them so the traffic jams never happen. >> looking at the next generation of innovation and technology. again, 100 years of ibm and big blue. our guest, bernie myerson, vice president of innovation at ibm. >> susie: interesting stuff to think about.
>> susie: that's "nightly business report" for thursday, june 16. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> be more.